I’m Professor and Chair of the Department of Economics at LIU Post in New York. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I’ve have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China’s Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I’ve traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success.

World's Most Respected Companies In 2014: Where Are The Chinese?

Chinese companies have yet to win the respect of institutional investors. That’s the finding of a recently released Barron’s 2014 survey of World’s Most Respected Companies—consistent with the findings of the 2012 and 2013 surveys.

The top of the list is filled mostly with American companies like AppleApple, Berkshire HathawayBerkshire Hathaway, BoeingBoeing, GoogleGoogle, Johnson & JohnsonJohnson & Johnson, Disney, Amazon.com, and Visa. The middle of the list is also filled with American companies, though it includes a good number of European, Japanese, and Brazilian companies. Only three Chinese companies, China Mobile, Tencent Holdings, and China Construction Bank (HKSE:0939 HK) made it near the bottom of the list—the same number as last year. China Mobile dropped from the 95th position in 2013 and the 88th position in 2012 to the 96th position in 2014; China Construction dropped from 97th to 99th position. Tencent Holdings was new on the list (97th), replacing CNOOC, which disappeared from the list

Barron’s survey doesn’t provide any specific reasons for the low ranking of the Chinese companies, but the moderate performance of Chinese equities must have something to do with it—China’s iShares Large Cap ETF (NYSE:FXI) is up 15 percent for the year versus a 24 percent gain for the S&P 500.

Still, there is more to it. The survey outlines the five most important attributes that help companies gain respect among institutional investors: strong management, sound business strategy, ethical business practices, competitive edge, and revenue and profit growth. Chinese corporations are lagging behind their American and European counterparts in all these attributes, for four reasons, as discussed in previous pieces here: First, China has yet to develop a modern management system. In spite of some progress, Chinese companies remain under the direct or indirect control of the government that continues to decide which company will be in what business and for how long. This is especially the case in large state oligopolies, where the government remains the largest stockholder, and management often lacks the skills, the incentives, and the freedom to adjust inputs and outputs to changing market conditions. Second, government mandates and ever-changing business rules undermine the ability of Chinese corporations to innovate and to adopt new business models. Third, Chinese corporations have yet to develop a modern capitalist mindset, whereby corporations exist to create value for consumers and the society at large rather than to enrich their owners, often party bosses and government bureaucrats. Fourth, China has yet to create a clear and transparent accounting system that will assure investors that corporate numbers are what they look to be.

The Bottom Line

China has done a lot of things right in recent years. That’s how it became the world’s second largest economy. But its companies have long way to go before they gain the respect of the world investment community. Perhaps, they need to learn a lesson or two from Apple, which tops the list.

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